IMF Executive Board Completes Third and Final Review Under the Stand-By Arrangement with Jordan

The Executive Board of the International Monetary Fund (IMF) completed the third and final review of Jordan's performance under a two-year SDR 85.28 million (about US$125.6 million) Stand-By Arrangement. The arrangement, which was approved on July 3, 2002 (see Press Release No. 02/31), has been treated by the Jordanian authorities as precautionary after an initial disbursement amounting to SDR 10.66 million (about US$15.7 million), given the strength of Jordan's external position.

There was no formal Executive Board discussion of Jordan's performance under the final review of the arrangement in light of the recent Board discussion, on April 2, 2004, on the second review under the Stand-By Arrangement and on Jordan's 2004 Article IV Consultation, and Jordan's fully satisfactory performance under the arrangement.

Jordan joined the IMF on August 29, 1952, and its current quota is SDR 170.5 million (about US$251.1 million). Its outstanding use of IMF credit as of end-June 2004 is SDR 248.98 million (about US$366.7 million).

Following the Executive Board's approval of the Third Review under the Stand-By Arrangement for Jordan, Anne Krueger, First Deputy Managing Director, issued the following statement:

"Jordan's economic performance has strengthened and its outlook improved substantially in the aftermath of the war in Iraq, supported by prudent macroeconomic management. The combined effect of surging exports, rebounding domestic demand, and a revitalized tourism sector has led to a strong recovery in real economic activity in the first quarter of 2004. The track record of sound macroeconomic management, trade liberalization, and reforms on multiple fronts have transformed Jordan into a dynamic economy led by the private sector.

"The remarkably strengthened fiscal position in the first quarter of 2004 is the result of strong revenue measures and reforms implemented earlier and a manifestation of the authorities' resolve to contain budgetary outlays, notwithstanding large grant inflows. The package of revenue measures implemented in April will further strengthen fiscal performance in 2004.

"Credible financial policies and a strong external reserve position have brought a high degree of financial stability and investor confidence. Continued strong export performance, a buoyant medium-term export outlook, and the comfortable reserve position indicate that competitiveness is adequate. The health of the banking sector has improved further reflecting stronger profitability, more prudent credit policies, and the effective implementation of the prompt corrective action framework.

"Jordan continues to face challenges over the medium term, in the form of a high debt burden, dependence on external grants, and vulnerability through higher oil prices. Achieving the debt limits under the Public Debt Law by 2006 will require sustained fiscal consolidation including elimination of subsidies on petroleum products, comprehensive reform of the direct tax system, and expenditure rationalization. In this context, the substantial reduction in government debt recorded so far in 2004 and the government's track record on fiscal consolidation is encouraging.

"The authorities have demonstrated a strong commitment to prudent financial policies and structural reform, and have established a solid record of policy implementation. Given the strength of the external position, the authorities' intention not to make the purchase associated with the completion of this review is appropriate, and consistent with their intention to graduate from a series of Fund-supported programs following the completion of the current Stand-By Arrangement in July 2004. The Fund looks forward to continuing its close relationship with Jordan in the context of enhanced surveillance and technical assistance," Ms. Krueger said.